The State of Hotel Loyalty Programs: A Devaluation Story

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President Obama gave his State of the Union address last week, and with all the hotel points program changes coming down the pike, I thought I’d give my own State of Hotel Points address – and the state of hotel points is…worsening!

Here’s a recap of the news we’ve gotten so far:

Starwood

Back in mid-January, Starwood announced it would be changing its its Cash & Points redemption options starting March 5, 2013, as well as adding the ability to redeem Cash & Points for upgraded rooms and suites. You can find the current category breakdowns here, but for reference, here they are:

SPG’s new cash and points redemption levels.

Starwood’s Cash & Points redemptions have historically been some of the best hotel point redemption values around, often yielding at least 3 cents per point in value, but often much more than that. That’s going to be a lot harder to achieve consistently since these increases are 20% across the board.

On the bright side, you can now make cash & points redemptions at all Category 1 and 2 hotels worldwide, not just in the US, Canada and Asia-Pacific, as is the case now; and you can use Cash & Points for suites, which is good if you value those bigger rooms, though possibly bad news for elites since it will make upgrades harder to come by.

Marriott

Both Marriott and Ritz-Carlton announced major changes last week. The Marriott changes, which will begin May 16, include there will be a new top-tier category – Category 9 – which will cost members 45,000 points per night, as well as category changes for over a third of their properties around the world.

Marriott’s award level categories.

You can see from the full list of changes here, hundreds of hotels that are having their categories raised while just a few are having their categories lowered. In fact, only 1% of hotels are dropping a category while a whopping 36% are being elevated by at least one category. Marriott also points out: 73% of properties remain in its lower-run 1-4 Categories.

If you already have a Marriott redemption in mind and have collected the necessary points for it (or are close), you’d be wise to take a look at the revised category list in case the hotel or resort you’re thinking of is being upped a category and make your reservation now if possible rather than waiting until the redemption level goes up after May 16.

Hilton

As I reported yesterday, Hilton has just announced a major devaluation of the HHonors program effective March 28, 2013 which include new (more expensive) tiers and seasonal (more expensive) pricing, but also a 5th night free benefit for elite members.

Reward Categories – We will be expanding to ten hotel reward categories to account for all of the new hotels and resorts that have opened in the past few years. With 3,900 hotels and resorts in 90 countries you are sure to find the perfect place for your next reward stay.

Seasonal Hotel Reward Pricing – For most of our hotels and resorts, we will introduce seasonal pricing for reward stays. The amount of points needed for a Standard Room Reward and a Points & Money Reward will vary during certain times of the year.

5th Night Free – Now members with Silver, Gold or Diamond elite status will get a free night* when they book a Standard Room Reward stay of five or more consecutive nights.

The new chart will have 10 categories. You can see what hotels will be in which category in this PDF.

So taking these new rules into account, here’s how much money you’d have to spend just at hotels in order to earn the points necessary for one free award night at a top-tier property in each chain at base earning levels.

Club Carlson: $2,500 for a free night at a top-tier Carlson property like a Radisson Blu (50,000 points earned at 20 points per dollar)Hyatt: $4,400 for Hyatt (22,000 points at 5 points earned per dollar spent)Marriott:$4,500 at Marriott (45,000 points at 10 points per dollar spent)Priority Club: $5,000 at Priority Club (50,000 points at 10 points per dollar spent)Hilton: $6,333 for a free night at a top-tier Hilton (95,000 points at 15 points earned per dollar spent)Starwood:$15,000 for a Starwood Category 7 property (30,000 points at 2 points per dollar spent) or $7,775 for Cash & Points for 15,000 points (at 2 points per dollar) plus the $275 copay.

Top-tier redemptions at base-level earning are just a snapshot of what a hotel program is all about, but they do provide an accurate portrait of what it takes to get a decent return at each, and among others, Hilton went from middle-of-the-road to nearly the top of the pack in terms of how much money you have to spend to stay anywhere aspirational.

The real takeaway here, though, is that with a few exceptions like Club Carlson, no matter which hotel brand you give your loyalty to, you’re going to have to spend a lot more money – whether it’s in terms of the outlay just to rack up the points or the cash copay on a cash & points redemption – to earn enough points to stay at a hotel you want.

A Warning to Hotel Loyalty Programs
As you hack away more and more of the value proposition, I think you’ll realize that consumers are actually pretty smart and will start shifting their spend towards chains that actually reward loyalty and not punish it. This may not come in the form of traditional points, but many boutique hotels offer far more enriching experiences with more amenities and at cheaper prices. This Hilton devaluation was so brazen that I do think it will hurt them dearly in the end when Amex and Citi cardholders reduce their spend or cancel their cards. In fact, if the impact is so negative, I could see those issuers coming after Hilton since there are likely clauses in the contracts that state that Hilton can’t materially change the program (since the credit card companies are buying millions of dollars worth of points that their cardholders can use at a later time and date). I’ll be complaining to both American Express and Citi about the Hilton changes and hope everyone else considers doing so as well if you don’t like the changes.

Home rental/swap sites like Airbnb and VRBO are becoming more enticing as well. I’m currently typing this post from a 2 bedroom bungalow in Los Angeles that I rented for less than a small standard room at the W Westwood or Century City Hyatt. I’m here for a week, so I crunched the numbers and while I would have liked to have gotten the nights towards elite status, I had a friend coming with me and my new puppy, so having my own house made sense on so many levels. The way I envision it, is that I got a monster suite upgrade and saved a boatload of cash.

I don’t mean to be so doomsday with this post, but I do feel that I’d be remiss to not remark that 2013 has been a remarkably bad year so far for devaluations in the hotel points industry.

Have the recent changes made you think differently about your hotel/lodging strategy in 2013 and beyond?

Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Editorial Note: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.